by Justin Cole
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ATTENTION - ADDS detail on takeover, quotes, background ///
WASHINGTON, March 16, 2008 (AFP) - US banking titan JPMorgan Chase said late Sunday it was taking over the crisis-hit investment bank and brokerage Bear Stearns for around 236 million dollars.
JPMorgan Chase's management said the takeover of Bear Stearns, which has seen its market value plummet due to vast losses related to mortgage-backed securities, had been approved by the boards of directors of both banks.
Under its terms, hatched by both banks' top executives this weekend, JPMorgan Chase will pay just two dollars a share for Bear Stearns.
JPMorgan Chase said the Federal Reserve had already approved the takeover, underlining that government officials want the takeover consummated as quickly as possible.
Bear Stearns rapid demise has been reflected in its tumbling share price in recent months. It shares closed down a hefty 47 percent at 30 dollars on Friday.
Bankers at JPMorgan Chase re-valued its shares dramatically lower over the weekend, and Bear Stearns's stock has fallen from a 2007 high of 158.39 dollars.
Rumors swirled around Wall Street on Friday that JPMorgan Chase would seek to takeover Bear Stearns after Bear Stearns obtained an emergency loan from the US central bank in coordination with JPMorgan Chase.
JPMorgan Chase said in a statement that the deal will be a stock-for-stock exchange and that it will swap 0.05473 shares of JPMorgan Chase common stock per one share of Bear Stearns stock.
Executives said the total cost of the takeover, including guarantees and litigation costs would be around six billion dollars.
The deal also values Bear Stearns at a small fraction of its market worth Friday of just over four billion dollars.
"JPMorgan Chase stands behind Bear Stearns," said Jamie Dimon, JPMorgan Chase's chairman and chief executive.
"Bear Stearns' clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns' counterparty risk. We welcome their clients, counterparties and employees to our firm, and we are glad to be their partner," Dimon said.
JPMorgan Chase, which has a market worth of around 124 billion dollars, said it was guaranteeing Bear Stearns' trading obligations, and the obligations of is subsidiaries.
The bank said the Fed had agreed to fund up to 30 billion dollars of Bear Stearns' less liquid assets in a bid to help prop up the deal.
The assistance Bear Stearns has received from the Fed is extremely rare and underlines the severity of the financial turmoil rocking Wall Street and some of the largest US banks.
Bear Stearns' losses on its mortgage porfolios and investments were triggered by the US housing downturn and especially by mounting defaults on subprime home loans, or loans granted to Americans with poor credit.
Other banks such as Citigroup and Merrill Lynch have also suffered significant mortgage-related losses in recent months resulting in a widening credit crunch which is embroiling US and global markets.
The Fed has poured hundreds of billions of dollars into the financial system and slashed interest rates by 2.25 percentage points since September to battle the credit crunch which is threatening to push the world's largest economy into a recession.
President George W. Bush last month signed a 168-billion-dollar economic stimulus and the government and banks have backed a number of initiatives to help homeowners faced with losing their homes amid tightening credit, job cuts and a slowing economy.
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